Troopergate, New York-Style
Eliot Spitzer's character problem.
Spitzer still goes to great lengths to hide the extent to which his multimillionaire father supports him. Few people realize that Spitzer, his wife, and three daughters do not live in the governor's mansion in Albany, but instead live rent-free in a huge apartment overlooking Manhattan's Central Park. The 25-story building, on Fifth Avenue near the Metropolitan Museum of Art, has just two apartments per floor, and Spitzer lives in a pad that real estate brokers say would easily go for $20,000 a month on the open market. His father, Eliot Spitzer's office said, pays unspecified gift taxes for his son's use of the apartment in the building, which the father owns.
After quitting the Manhattan DA's office in the early '90s, Spitzer toyed with starting a local think-tank modeled on the centrist Democratic Leadership Council, and, in the days when Giuliani was shaking up Gotham, was a rare Democrat saying nice things about the GOP mayor. Yet Giuliani, also a former prosecutor, did not return the favor. He once joked that, after being in a room with Spitzer, "I feel like I need a shower."
Democratic voters might have reached a similar conclusion, for Spitzer's first attempt at elective office was a dud. In that run for attorney general in 1994, he finished fourth in a field of four Democrats seeking the party's nomination.
Instead of going into the family business--something he said he would have done if all else failed--Spitzer got into his car and drove around upstate New York, making nice with local pols. He told New York magazine he racked up 70,000 miles in what he called "purgatory." Others have hinted that he wasn't just spending time--he was buying support with Dad's cash.
Whatever the truth, the turnabout was dramatic. Spitzer easily rolled through the 1998 primary and was on the verge of ousting Republican incumbent Dennis Vacco when he finally admitted that the millions in loans he had taken out for both races were really being paid off by his father--a no-no under even New York's notoriously lax election laws. To describe Spitzer's campaign books as convoluted would be an understatement.
Early in the 1994 campaign, Spitzer took out a $4 million loan from a bank, using as collateral eight condominium apartments his father had given him. The apartments, in 200 Central Park South, a prime location near the Plaza Hotel, had been leased to tenants, with Eliot living off the income stream, probably several hundred thousand dollars annually. (Spitzer also received $200,000 from his father for "consulting.") Spitzer then loaned the $4 million to his campaign.
Under state law, however, campaign loans automatically become donations if they are not repaid by election day. They were not repaid in this case, and, even worse for Spitzer, he lost. His $4 million loan was now deemed a contribution, and he owed the money to the bank. Four years later, the public learned how Spitzer repaid the bulk of the loan: He borrowed $3 million from his father, which he then gave to the bank. Under the terms of the loan, Eliot had 10 years to pay his father back the $3 million, at 7 percent interest.
Early in the '98 race, Spitzer repeated the process. He got a new bank loan, this time for $4.8 million, again using the eight apartments as collateral, then gave the money to his campaign, again as a personal loan. When he disclosed the '98 transaction, Vacco complained that no bank would lend anyone that much money based on Spitzer's reported income, and began demanding details on how Spitzer repaid the '94 loan.
Spitzer responded by saying that the $4.8 million loan covered both of his campaigns, a statement he made over and over. Then suddenly, late in the race, Spitzer confessed that the $4.8 million loan covered only 1998, and that he had repaid the 1994 bank loan by borrowing from his father. The news hurt him and gave Vacco a lift, but it was not enough to stem the partisan tide in a strong Democratic year that saw Chuck Schumer defeat incumbent senator Al D'Amato by 10 points.
Spitzer won, but he had a new problem: He owed the bank $4.8 million, in addition to owing $3 million to his father. Of course, technically, the $4.8 million was owed to him by his own campaign. As for the $3 million, Dad was not exactly a demanding creditor, since his terms did not require any payments for 10 years.
As the incoming attorney general, Spitzer was in a commanding position to raise the money from contributors to repay himself. Although the maneuver would have been legal, it would have failed the smell test. It's one thing for a candidate to solicit contributions during the race, it's quite another for a victorious candidate to do the same thing to repay himself.